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Implementing Financial Management Practices

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Aaron Rubardt
July 11, 2019

King County Executive Dow Constantine has set an ambitious goal for King County to become the best run government in the nation. While the County was still reeling from the Great Recession, we began taking steps to meet this goal, in part, by strengthening our finances—starting with our financial management practices.

One of the first—and most important—steps we took was implementing a quarterly financial monitoring process to routinely assess the health of the County’s funds. Our goal was to develop a common understanding of the health of the funds between department leadership and the central budget office.  This effort was as much about understanding the technical details of each fund as it was about opening the lines of communication with our partners.

Ten years later, King County has successfully monitored the health of every one of our 145 funds. Getting to this point was not easy, and we learned much along the way.

Prior to the launch of the best run government initiative and our efforts to improve the County’s financial management practices, our approach to monitoring the health of our funds was reactive rather than strategic. We did not consistently use financial plans to manage risk, plan for the long term and drive decision-making, but instead reviewed fund-level financial plans annually, primarily to confirm that they were submitted with the budget rather than as a valued-added step.

While we made minor improvements over the first several years of Executive Constantine’s administration, we began to focus on monitoring the health of our funds in earnest in 2014. It proved to be a challenge. Among the barriers we faced were: our financial plans used inconsistent formats, different agencies interpreted fund balance in different ways, we did not know the purpose of each fund, our process lacked structure and key stakeholders did not see the value in regularly reviewing financial performance.

Fast forward five years and we have successfully monitored every one of the County’s funds. So, how did we get here? 

First, we embraced a plan-do-check-adjust cycle. Each year, we looked at what was working and what wasn’t, and we made the necessary improvements. Key changes included:

  • Working with leadership across the County to develop a common understanding of the value of the process.
  • Developing standard materials and expectations, including templates for fund profiles that include each fund’s mission, revenues, expenditures and systemic risks.
  • Creating a set of planning assumptions that would help us identify potential problems in the next budget cycle.
  • Committing to appropriately staffing the effort, with one employee dedicating roughly one-third of their time to both administrative work and bold strategic thinking. 

Now, every quarter central budget staff and department leadership monitor the health of the County’s funds on a rotating basis, meeting with agencies to look for variances and discuss any potential issues that may arise. Through this process, we are better able to assess and manage risks. The open dialogs have strengthened relationships among budget and agency staff—in part because the number of financial “surprises” we encounter has been greatly reduced.

The meetings also provide a forum for discussing upcoming budget actions, and we are often able to make budget and policy decisions before the official budget process has even started.  Through this process, we have also made a concerted effort to appropriately size reserves to ensure that at-risk funds can continue to provide services during the next recession, and we have closed funds that are no longer necessary.

While one of the goals of financial monitoring was to help eliminate unwanted financial surprises, there has been one pleasant surprise. By thoroughly examining each fund, we have found a lot of previously undiscovered money, both in funds that were no longer being used and reserves that were simply larger than they needed to be. This “new” money has allowed us to invest in additional services for County residents and avoid some rate and fee increases.

So, what’s next? Through our annual plan-do-check-adjust process, we know there are areas for improvement. We are adding new components to the quarterly monitoring meetings, including performance measures and check-ins on progress of significant budget investments. We continue to build a better understanding of our at-risk funds, and are working to develop realistic mitigation plans, as well as recession response plans, at the fund level so that critical services can continue to operate during a serious economic downturn. We are also working to better leverage business intelligence systems and automation, with an eye toward exploring artificial intelligence technology in future years and reducing the administrative burden on budget and department staff.


Author: Aaron Rubardt is the Deputy Budget Director for King County. He has worked with the County for over a  decade with a focus on financial management, planning and risk mitigation. 

 

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